Even in this lockdown, with nearly 100 of our employees working from home and a loan book of £1.8bn, we are still writing new business and have agreed a number of loans in the past few weeks for both new and existing clients.
While this is a far cry from business as usual, it is a testament to the resourcefulness of the team that we are still getting deals approved within five working days. One of the things we pride ourselves on is consistent, through-the-cycle lending.
We intend to continue trading and supporting our existing clients with new projects, as well as selectively taking on new clients. All of this comes against a backdrop of a number of lenders in our space who have shut up shop and stopped lending altogether.
As chancellor Rishi Sunak commented in his open letter to the industry, construction is critical to our economy. Housebuilders have been encouraged to remain on site if it is safe and practical to apply social distancing.
Approximately 60% of our borrowers are still on site, with the majority of our clients being family-owned housebuilders that are building semi-detached or detached housing in market towns, where social distancing can be practised more easily.
As in ‘normal’ times, it is the level of service that is key. We continue to prioritise delivering money quickly and, equally, understanding when things aren’t going right.
As a business, we recognise things don’t always go according to plan – and that is increasingly likely to be the case in the current environment. We will support our clients through this, backing the management of our borrowers throughout the build, even in this difficult environment.
While there is uncertainty, we remain steadfast in our commitment to our borrowers
We actually saw record levels of sales completions last month as housebuilders pushed to get them over the line. While we obviously expect this to have slowed down in April, exchanges are still taking place. There are issues around moving house, but some removal companies continue to operate, providing social distancing is being adhered to.
New-home buyers are used to buying off plan, so many of our developers are offering virtual viewings of show homes, which are proving to be popular and effective.
A number of housebuilders also planned for a harder Brexit, so had bulk-bought materials. This has stood them in good stead in the short term. However, we will begin to see more issues from the supply-chain side if restrictions aren’t eased in two to three months.
The big questions for the whole of the property industry are how long this lockdown is going to go on for and what the implications are for the housing market thereafter. Within Close Brothers, we are running scenarios to test the implications for, and resilience of, our business model.
Diversity is a strength
The property division is only one part of what is a diverse group of businesses within Close Brothers. We believe diversity is a key strength and this has served us well over the past 40-odd years. The group is well-funded, with a diversity of income streams, and our intention is to continue trading in all our core businesses throughout this difficult period.
In property, we always demonstrate a measured and cautious approach. This, allied to our market experience gained over many years and at least three recessions, should stand us in comparatively good stead when values fall and there are delays on site.
If the government extends Help to Buy (HTB) on existing terms beyond April 2021, then that would be very good for the market as it would aid liquidity and help restore the confidence of housebuyers.
This would be better than the proposed change to it being for first-time buyers only, with regional caps that may prove unworkable. It would give more confidence to mortgage providers, too, given the cushion that the HTB loan creates in most cases, limiting their support to 75% of purchase.
When we see restrictions eased, SME housebuilders should prove to be more nimble and better-placed to move forward than the larger PLC housebuilders, as typically they are more flexible and equipped to dial up or slow down their trading to take advantage of the next site that becomes available to them.
So as we look to the future, we are cautiously optimistic that our client base will remain resilient, and while there is a huge amount of uncertainty, we intend to remain steadfast in our commitment to our borrowers and continue to support the development of much-needed new homes across the UK.
Frank Pennal is chief executive of Close Brothers’ property finance division
No comments yet